Fixed deposits (FDs) are charming investment avenues that offer high-interest rates and assured returns. But did you know your interest-yielding and seemingly passive investment, i.e., your FD, can also assist you in obtaining a loan? Indeed, you can take a loan against an FD, which is a secure, quick, and easy way to meet immediate financial needs without impacting your savings or investments. However, it is essential to be well-versed with the process, eligibility, and necessary documents before applying for a loan against FD.
Understanding Loan Against FD
A loan against FD is fundamentally a secured loan. In this case, your fixed deposit acts as collateral, thereby offering a hassle-free loan disbursal process with minimal documentation. In times of financial hardships, emergency expenses, or significant investments, you might not want to break your FD and lose out on the interest. This is precisely where a Loan Against FD steps in, allowing you to leverage your FD for meeting urgent financial needs without liquidating or breaking it prematurely.
Eligibility for Loan Against FD
Verify the eligibility criteria before applying for a loan against FD, as they differ based on the lender’s policy. Generally, all individuals who own a fixed deposit with the bank or non-banking financial company (NBFC) can opt for a Loan Against FD, including minors, senior citizens, and joint account holders. It’s paramount to ensure your FD hasn’t matured and isn’t tax-saving or locked-in.
Loan Against FD: Process and Documents
The process to obtain a loan against an FD is simplified and time-efficient compared to regular types of loans. Firstly, it’s crucial to evaluate your financial requirements and gain precision on the loan amount. Typically, you can get a loan of up to 90% of the deposit amount, depending on the bank’s or NBFC’s policy.
Once decided, approach your lender with a filled loan application form. Some financial institutions offer online application forms for ease, making it a very convenient procedure. This form will ask for information regarding personal identification, FD details, and loan details.
Documentation part is painless, given the loan’s secured nature. You may need your identity proof, address proof, FD receipt, duly filled loan application form and a passport-size photograph. However, it’s vital to check the specific documents required by your lending entity, as it might differ.
After successful verification of details and processing of documents, the loan is disbursed swiftly, usually in a few minutes to 24 hours, enabling immediate resolution of financial crises.
Interest Rates of Loan Against FD
Interest rates for a Loan Against FD are generally competitive, making it a suitable option for people who need a low-interest loan. These interest rates hover around 1-2% above the FD interest rate, providing a cost-efficient solution when you compare it to the high-interest rates of unsecured loans like personal loans.
Alternatives to Loan Against FD: Loan Against Insurance Policy & Loan Against Shares
While a loan against FD is a reliable option, other alternatives such as Loan Against Insurance Policy and Loan Against Shares are also popular choices for quick funds.
A loan against an insurance policy is a secured loan taken by pledging your insurance policy as collateral. For eligibility, most lenders require the policy to be fully paid up and in effect for a predetermined period before the loan application. You would need to submit specific documents relating to the insurance policy, and the loan amount typically ranges up to 85-90% of the surrender value of the policy.
Loan against shares, on the other hand, is a loan availed by pledging your equity shares, mutual funds, bonds, or other securities. This loan’s eligibility and needed documents are similar to a Loan Against FD. Financial institutions have a pre-approved list of securities that can be pledged. However, it’s advised to remember that this option can be risky given the volatility of the stock market.
Download Bajaj Finserv app
For a smooth and efficient loan process, consider using the Bajaj Finserv app. This app simplifies applying for loans against fixed deposits, offering quick approvals and easy document submission. With real-time tracking and instant assistance, the Bajaj Finserv app enhances your borrowing experience, making it convenient to manage and utilize your loan efficiently.
To summarize, a loan against FD offers a sturdy lifeline in financial exigencies without disrupting your savings or investments. Ensure to understand the process, check your eligibility, be clear about the documentation, and consider the interest rates before opting for it. Likewise, other options like loan against an insurance policy or shares can also be pondered upon depending on one’s requirements, risk appetite, and convenience.
